Are You Serious? The UK Considers Exiting The European Union

A mid-life crisis? Forty years after joining the European Union (the EU, formerly the EEC), the United Kingdom has brought up the possibility of pulling out. In a 23 January speech in London, Prime Minister David Cameron confirmed that a referendum would be held on the question. Although a British exit, or “Brixit,” is now officially on the table, it nonetheless seems very hypothetical.

A very hypothetical “Brixit”
The call for a referendum seems hypothetical because it would not be held until year-end 2017, and only if the current prime minister wins the general elections in 2015, which is far from guaranteed. Current surveys show the Labour party with roughly a 10-point lead over David Cameron’s Conservative party. Indeed, one reason why Mr. Cameron is toughening his tone towards the EU is to rally support from the euro-sceptic United Kingdom Independent Party (UKIP). Yet winning over votes from the UKIP will not suffice to change the balance of power.

Second, Mr. Cameron wants to renegotiate the treaties to make them more favourable for UK interests before calling a referendum. Yet nothing says its European partners are ready to negotiate. It is hard to see how UK demands to “repatriate” certain powers from Brussels to London can be reconciled with of Germany and France’s joint willingness to strengthen EU institutions, or with those of the eurozone.

French President François Hollande said that although the British were free to hold a referendum on staying in the EU, it would not be taken into account in the renegotiation of treaties. German Chancellor Angela Merkel responded along similar lines, saying that within the framework of the EU, the particular interests of the UK had to be weighed against those of the 26 other member countries.

The UK has always held a place apart within the European Union, which in the minds of its leaders, has mainly boiled down to a free trade zone. In 1984 Margaret Thatcher negotiated a rebate that substantially reduces the UK’s contribution to the European budget (to 0.64% of gross national income in 2011, compared to 0.75% for Germany and 0.89% for France). The UK opted out of the single currency and the Schengen agreements. It did not sign the charter on fundamental social rights or the fiscal compact introducing a balanced budget rule, which transfers more power to the European Commission.

Exiting would not necessarily be a good deal
It is one thing to scale back its participation and quite another to exit the EU. For the UK, the savings on its participation in the EU budget must be counterbalanced with the numerous advantages it procures from adhering to a single market, which can not necessarily be quantified: no customs duties, unrestricted capital movements, facility of locating abroad, and the development of trade-friendly infrastructures, among others. Nothing indicates that the UK stands to gain from sidelining itself from a market of more than 500 million inhabitants, which currently absorbs more than 50% of its exports.

As an EU member, the UK also benefits from greater political clout vis à vis the United States and the fast-growing emerging economies, such as China and Brazil. Seen from America, the prospects are not particularly encouraging that one of its historical allies would exit from a region like the EU in which it has such high economic interests.

Lastly, those who are absent are always in the wrong: the UK, by leaving the EU, would lose the capacity to influence European decisions, notably concerning issues it holds dearly such as deregulation of the services, energy and digital markets. Surely it would be much more complicated for the UK to accommodate the interests of its financial sector, notably in the face of the banking union that is being set up in the eurozone.

Prime Minister Cameron, who has said he personally favours remaining in the EU, is clearly aware of all that. His speech not only echoes the growing euro-scepticism back home, but is above all a way to highlight the UK’s interests to its EU partners. This strategy is debateable at best. Experience shows that referendums can be hijacked from their initial purpose to sanction the ruling party. If re-elected in 2015, Mr. Cameron would be taking a big risk in 2017...

ByCatherine STEPHAN, Jean-Luc PROUTAT